The next time you open your wallet, remember that one out of
every three dollars you are carrying is likely to be spent on
products or services of a franchised company. There are more than
400,000 of them in the United States, and these firms account for
nearly one-third of all retail sales. -Entrepreneur's 1st
Annual Franchise 500Â®, March 1980

It seems there's nothing new under the sun. And the only
constant in life is change. Over the past 20 years, franchising has
seen its share of constancy-and of change. We realized back in 1979
just how monumental this marketing concept called franchising could
be. And we took a leap of faith, inventing a ranking concept called
the Franchise 500Â®.

On the 20th anniversary of our highly celebrated Franchise
500Â®, we've taken time to reflect on how much has really
happened since our humble beginnings. Here, some excerpts from our
first Franchise 500Â® issue, with a flash forward to 1999:

Where is the Next McDonald's?

On behalf of our readers, we're still asking this question.
Some of the answers may be surprising, considering that when the
Franchise 500Â® started 20 years ago, a spate of today's
franchising stars didn't even exist. Auntie Anne's, TCBY,
Jackson Hewitt, Moto Photo and Fastsigns were unheard of then. The
entrepreneurs behind Yogen FrÃ¼z, this year's No. 1
franchise, as well as Papa John's Pizza, were still in high
school. Hot franchise concepts back then included convenience
stores, doughnut shops, family-style restaurants, furniture stores
and pancake houses.

Some categories are perpetually hot: Fried chicken, Mexican
food, pizza and, of course, hamburgers were, and still are, among
franchising's most popular offerings. Some opportunities boomed
and then fizzled, like independent video rental stores, which were
gobbled up by Blockbuster faster than a Spielberg movie hits No. 1.
Still others have come and gone and come again. Take tanning salons
(please). In 1980, we wrote, "While the jury is still out on
the long-term viability of the suntanning parlor concept,
there's no question that growth in this business has been
dramatic." In 1999, after a long sabbatical, this category is
once again back in the artificial limelight.

Many of today's Franchise 500Â® institutions were just
getting rolling 20 years ago. Subway had 134 franchises, plus 16
company-owned stores; now the company has almost 13,400 locations
worldwide. And what of the epitome of franchising? McDonald's
had a seemingly impressive total of 5,749 stores in 1980; it's
since solidified its status as a global icon, with over 16,000
franchises and nearly 5,000 company-owned locations worldwide.

Modern Conveniences

Robert Feinstein, chairman of the board of United Rent-All, a
major equipment rental franchise, tells of a time when he was
lunching at a McDonald's outlet and overheard two women
talking. "They said they'd eaten dinner there the night
before and had breakfast there earlier in the day. I asked why they
came back so often. 'Because it's fast and
easy!' " -Franchise 500Â®, March 1980

One of the most significant changes in franchising, reflected by
the Franchise 500Â®, has been the transition from a retail to a
service-oriented market. Practically everything required a
storefront location 20 years ago-today, the focus is not on
location, location, location, but convenience, convenience,
convenience. Services that save people time are always in
demand.

Technology and the World

The $400 hobby computer is an example of where technology is
leading us in one respect. Computer stores staffed by specialists
are blossoming all over the country to capitalize on this trend. As
this technology becomes more and more readily available to the mass
market, consumer acceptance will increase dramatically -Franchise
500Â®, March 1980

Another massive change in franchising came via technology, which
hadn't even truly hit the industry 20 years ago. Now franchise
business is e-business-so this year we've included Web
sites in our Franchise 500Â® listing for the first time.

The technological revolution has hit franchising full force,
making it easier for potential franchisees worldwide to explore
opportunities before they buy and then communicate more effectively
with their franchisor and fellow franchisees after they hop on
board. Franchise shoppers are no longer limited to investigating
franchises located in their immediate vicinity, but can research
the perfect franchise even if it's based halfway around the
world.

Through the Franchise 500Â®, we've also had a front-row
seat for major shifts in franchising and the economy at large. In
1981, we first started asking franchisors whether they were seeking
locations in foreign markets. Most said no. Today, everyone wants a
piece of the world-some companies even have franchise offices
overseas.

Behind the Scenes

Internal as well as external changes have affected the Franchise
500Â®. Perhaps the biggest change has been wrought by
technology. Twenty years ago, compiling the necessary data involved
reams of paper, tedious typing and retyping, and painstaking
typesetting. Today, sophisticated database software enables the
Franchise 500Â® staff, led by senior managing editor Maria
Anton and research editor Liza Potter, to manage more information
in less time.

That's not to say that the task is quick, easy or paperless.
The lengthy process of creating the Franchise 500Â® begins when
the staff sends out mailings to more than 2,000 franchisors in
early August. As application forms and Uniform Franchise Offering
Circulars (UFOCs) begin rolling in, phone calls are made to verify
information and fill in any gaps. Towering stacks of UFOCs are
sorted and analyzed. Throughout the process, CPA David R. Juedes
plays a key role, analyzing financial data from all participating
franchise companies to ascertain their financial stability.

Once all the information is in the database,
Entrepreneur's entire editorial staff gets involved,
with everyone from editorial assistants to managing editors
pitching in to proofread and reproofread every last digit for
accuracy. Finally, after three months of intense labor, Anton and
the Franchise 500Â® staff make the final ranking calculations,
using a closely guarded formula. (Rumor has it a well-known
franchisor once attempted to break our top-secret code.) Once the
scores are computed, the staff finds out who made the final
cut.

Making a Difference

Our Franchise 500Â® is not only the first and most
comprehensive listing of franchises in the world; it's arguably
the most successful. So great is its influence, we're often
(mistakenly) labeled a franchise magazine.

For whatever reason, other misconceptions have persisted.
"Everyone says you can't buy a McDonald's," says
Anton. "We asked them point blank , 'If our readers called
you, would they be able to buy one?' and they said yes. If they
had said no, we wouldn't include them. We're trying to find
the best opportunities for entrepreneurs. We do the Franchise
500Â® for the readers."

And it's gratifying to know we're successful not just in
relation to competitors who've followed in our footsteps, but
ultimately in doing just that-serving entrepreneurs. In fact, we
were pleased a few years ago to hear that Scott Shane, a professor
at MIT, conducted a study that revealed ranking in our Franchise
500Â® was one of the top factors determining which new
franchises survive.

Life at Entrepreneur wouldn't be quite the same
without the Franchise 500Â®. We'd like to think franchising
wouldn't be quite the same without it, either.

Snapshot

Surprisingly, photo franchises finished first in percentages of
unit growth. Visit the Photo Franchise Table to see the top five
photo franchises.